Tuesday, August 20, 2019

Tech Company B-Corp Certification Surprise

I found myself down the B-Corp Certification exploration rabbit hole. Now that the certification craze dust has settled a bit (remember a few years ago when everyone wanted to be B-Corp Certified?) we have some industry data around what it all means in practice.

Definitions

There are two "B corp" things to consider when talking about what it means to publicly commit to more sustainable business practices: one, B-Corp Certification which is a certification that a company receives from https://bcorporation.net/ (there are consultants out there who can drive the process for you). two, the Public Benefit Corporation incorporation type for corporate entities.

The Surprise

I was exploring "B-Corp Certification" in the context of a "tech company" considering codification of its existing business practices in a more public manner (money where its mouth is kinda stuff) when I came across what appears to be some fairly gnarly blockage for most tech companies. Most U.S.-based tech companies incorporate in Delaware (why they do this is a separate discussion and one you can just search the network for), yet B-Corp Certification of a Delaware incorporated company actually requires you to convert to a Public Benefit Corporate (PBC). You can read about that requirement at the bottom of this page which outlines some fine print. This means you'd have to move away from S or C Corp status, in order to be B-Corp Certified.

What Should You Do?

For most U.S. tech companies, that's pretty much a non-starter. The last thing you want is to go against the common grain of a massive legal/finance/tax industry that has been baked for decades around S/C-Corp incorporation types. If you're world is constrained enough that you, and your legal/finance/tax vendors/team, can foresee all the business dynamics therein, and you want to convert to PBC, then you can go ahead and do so without much risk. However, if your world is variable on these fronts (and let's face it, any tech startup is riddled with variability here), that's more risk than you probably want to swallow.

Etsy forwent their B-Corp Certification renewal in favor of retaining their existing corporate structure when the Certification dictated they convert to a PCB. Read all about that here.

The B-Corp Certification requirements/statutes may try and flex to accommodate Delaware incorporation rules/regulations to support more "tech companies" being able to B-Corp Certify, but that sounds like an uphill battle.

I dipped my toe in this water for a mere 24-hours. If someone has better data, please share in the comment section.

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